Tax implications in the event of divorce, separation or dissolution of a partnership

Married resident taxpayers and, under certain conditions, married non-resident taxpayers are taxed jointly in tax class 2 (classe d'impôt 2) on all of the income they earn during their union.

For tax years following the year in which the couple ceases to live together (by divorce, legal separation, or separation by virtue of a court decision), the taxpayers are taxed separately. However, they remain in tax class 2 for a period of 3 years following the dissolution of the marriage or a separation by virtue of an exemption to the law or a decision by a judicial authority.

Partners may not be taxed jointly for the tax year in which the partnership ends.

Who is concerned

All taxpayers, whether resident or non-resident, who cease to live together.

How to proceed

Implications of divorce, separation, or dissolution of a partnership for resident taxpayers

Married taxpayers are taxed jointly during their marriage and for the year in which one of the following events occurs:

a judgement of divorce, for whatever reason (divorce for fault, divorce for continuous and effective separation, or divorce by mutual consent); or

a judgement of legal separation; or

a court decision authorising separate residences (separation by virtue of an exemption to the law or a decision by a judicial authority).

For tax years following the year in which the couple ceases to live together, married taxpayers are taxed separately. However, they remain in tax class 2for a period of 3 years following the dissolution of the marriage or a separation by virtue of an exception to the law or a decision by a judicial authority.

Married taxpayers who live at different addresses—in a state of de facto separation—without a court authorisation or judgement continue to be taxed jointly.

Implications with respect to tax cards (employees or pensioners)

For married taxpayers

In the year in which the marriage is dissolved, if both taxpayers are employees in Luxembourg (or if both receive a pension that is taxable in Luxembourg), they are not required to carry out any formalities with respect to their (tax cards). The same is true where one of the divorced/separated spouses is an employee in Luxembourg and the other receives a pension taxable in Luxembourg.

The year following the dissolution of the marriage, and for a 3-year transitional period, if both taxpayers are employees in Luxembourg (or if both receive a pension taxable in Luxembourg), they must request a modification to their tax cards each year to remain in tax class 2. The same is true where one of the divorced/separated spouses is an employee in Luxembourg and the other receives a pension that is taxable in Luxembourg.

To change their tax cards, spouses who are separated or have begun divorce proceedings must fill out form 164 and attach a copy of the court approval of separate residence exempting them from living together. Said court approval can be a copy of the "judgment of first appearance" or of the "first order of the summary judge" or any equivalent document.

After the 3-year transitional period, separated or divorced taxpayers will be categorised either in tax class 1 (no children in the household) or 1A (with children in the household).

If only one of the taxpayers is an employee (or pensioner) in Luxembourg, that taxpayer must have their tax card modified by the competent RTS tax office in order to remain in tax class 2 for a 3-year transitional period.

For taxpayers living together as partners

Tax cards are not affected by the dissolution of a civil partnership. Therefore, the end of the partnership does not require any formalities to be accomplished with respect to the tax card.

Implications with respect to the income tax return

For married taxpayers

For the year of dissolution of the marriage, the taxpayers are taxed jointly (by filing a joint income tax return) and report all of their income together.

For the year following the dissolution of the marriage, each taxpayer files a separate income tax return and reports their own income.

For taxpayers living together as partners

Partners may not ask to be taxed jointly for the year in which the partnership ends. However, they may file a tax return on which they report their own income.

Implications with respect to annual adjustments

For married taxpayers

For the year of dissolution of the marriage, taxpayers who do not satisfy the conditions for filing an income tax return may, under certain circumstances, file a request for an adjustment of their tax withholdings by means of an annual adjustment. The taxpayers file one joint annual adjustment application.

In the year following the dissolution of the marriage, the taxpayer who does not file an income tax return may, under certain circumstances, individually file a request for a tax withholding adjustment by means of an annual adjustment.

For taxpayers living together as partners

For the year in which the partnership ends, the partner who does not file an income tax return may, under certain circumstances, file an individual request for a tax withholding adjustment by means of an annual adjustment.

Implications of divorce, separation, or dissolution of a partnership for non-resident taxpayers

During their marriage, non-resident married taxpayers who are taxed jointly must file a single, joint tax return. For the year in which one of the following events occurs, such taxpayers must also file a single, joint tax return:

a judgement of divorce, for whatever reason (divorce for fault, divorce for continuous and effective separation, or divorce by mutual consent); or

a judgement of legal separation; or

a court decision authorising separate residences (separation by virtue of an exemption to the law or a decision by a judicial authority).

For the tax years following the year in which the couple ceases to live together, married taxpayers are taxed separately. However, they remain in tax class 2for a period of 3 years following the dissolution of the marriage or a separation by virtue of an exception to the law or a decision by a judicial authority.

Implications with respect to tax cards (employees or pensioners)

For married taxpayers

In the year in which the marriage is dissolved, if both taxpayers are employees in Luxembourg (or if both receive a pension that is taxable in Luxembourg), they are not required to carry out any formalities with respect to their tax cards. The same is true where one of the divorced/separated spouses is an employee in Luxembourg and the other receives a pension taxable in Luxembourg.

For the year following the dissolution of the marriage, and for a 3-year transitional period, if both taxpayers are employees in Luxembourg (or both receive a pension taxable in Luxembourg), they must request a modification to their tax card each year to remain in tax class 2 during the 3-year transitional period. The same is true where one of the divorced/separated spouses is an employee in Luxembourg and the other receives a pension that is taxable in Luxembourg.

To change their tax cards, spouses who are separated or have begun divorce proceedings must fill out form 164 and attach a copy of the court approval of separate residence exempting them from living together. Said court approval can be a copy of the "judgment of first appearance" or of the "first order of the summary judge" or any equivalent document.

After the 3-year transitional period, separated or divorced taxpayers will be categorised either in tax class 1 (no children in the household) or 1A (with children in the household).

If only one of the taxpayers is an employee in Luxembourg, that employee must have their tax card modified by the competent authority (see above) in order to remain in tax class 2 for the 3-year transitional period.

For taxpayers living together as partners

The end of a partnership does not require any particular formalities with respect to the tax card.

For the year following dissolution of the marriage, and under certain conditions, each taxpayer files a separate income tax return and reports their own income.

If only one of the taxpayers receives a salary in Luxembourg, under certain conditions that taxpayer may file an income tax return.

Treatment of non-resident taxpayers as resident taxpayers

For the year in which the marriage is dissolved, non-resident taxpayers who opt to be treated as residents for tax purposes are taxed jointly and must file a joint tax return.

For the year following the dissolution of the marriage, under certain conditions each taxpayer may opt to be treated as a resident for tax purposes and may file a separate income tax return.

For taxpayers living together as partners

Partners may not ask to be taxed jointly for the year in which the partnership ends. However, they may file a tax return on which they report their own income.

Implications with respect to annual adjustments

For married taxpayers

For the year of dissolution of the marriage, taxpayers who do not satisfy the conditions for filing an income tax return may, under certain circumstances, file a request for an adjustment of their tax withholdings by means of an annual adjustment. The taxpayers file one joint annual adjustment application.

In the year following the dissolution of the marriage, the taxpayer who does not file an income tax return may, under certain circumstances, individually file a request for a tax withholding adjustment by means of an annual adjustment.

For taxpayers living together as partners

For the year in which the partnership ends, each partner who does not file an income tax return may, under certain circumstances, file an individual request for a tax withholding adjustment by means of an annual adjustment.